Dottorato di ricerca in
Lavoro, Sviluppo e Innovazione
Ciclo XXXII
“Hidden Social Dumping and Employment in Supply Chains: Phenomenology
and Safeguards”
ESSAY 1: Hidden social dumping along enterprises’ supply and production chains – a
theoretical model
ESSAY 2: Does the legal setting of intra-EU posting of workers leave space for ‘hidden social
dumping’-practices?
ESSAY 3: TCAs as tool to contrast and prevent (hidden) social dumping?
Candidato
Markus Cappello
Relatore:
Prof. Iacopo Senatori
Correlatore: Prof.ssa Ulpiana Kocollari
2
Abstract [English]
In order to study the interdisciplinary social, economic and legal phenomenon known as ‘social dumping’ (which essentially comes in three forms: ‘wage dumping’, ‘welfare dumping’ and/or ‘fiscal dumping’), the present analysis chooses to apply an interdisciplinary approach and examines some
specific forms of social dumping practices as well as a number of potential tools and instruments that
can help to contrast and prevent them.
The first Essay defines ‘social dumping’ as ‘unfairly’ evading and/or undermining existing social and labour regulations and develops the specific concept of ‘hidden social dumping’, that is then used throughout the Ph.D. thesis. The specific form ‘hidden social dumping’ only ariseson two out of the four ‘geographical levels’ of social dumping, namely the ‘national-domestic level’ and the ‘intermediate level’ and deliberately excludes the most obvious ‘global level’ of social dumping, as well as the ‘intra-corporate level’ of social dumping. In Part 3 of Essay 1 the author develops the theoretical model “hidden social dumping along enterprises’ supply and production chains” which shows that companies’ growing outsourcing practices and strategies within the same country and/or within the same homogeneous cultural and legal-normative framework (e.g. the EU) can, at least partly, be analysed from a ‘hidden social dumping’perspective. This builds upon the (underlying) hypothesis, -supported by earlier literature-, that core enterprises ‘unfairly’ (and often at the ‘edges of legality’) shift labour and production costs to the lower ends of the supply chain.
The second Essay is a legal analysis of the only intermediate level of hidden social dumping and examines whether, how and to what extent the legal setting of intra-EU posting of workers and in particular the (legal) evolution of the Posted Workers Directive leaves space for hidden social dumping practices within the EU internal market. It is shown that neither the PWED 2014/76/EU (mere focus on the PWD’s implementation and enforcement without intervening on the PWD’s actual content and the substantial concepts) nor the Revised PWD 2018/957 can entirely solvethe weaknesses and loopholes that the original ‘framework Directive’ PWD 1996/71/EC left and leaves for investing in hidden social dumping practices based on the intra-EU posting of workers. Even if the Revised PWD 2018/957 is shown to introduce some significant clarifications and modifications (definition of a maximum posting time period, introduction of the concept ‘remuneration’), in the end it remains an ‘internal market directive’ whose legal basis remains the ‘Freedom of service provision’ (Art. 56 TFEU) without being extended also to ‘social policy’, per Art. 153 TFEU (with imaginable repercussions on the CJEU’s interpretation line), and whose scope of application for contrasting and preventing hidden social dumping practices remains limited. For a more accurate assessment of the 2018 Revised PWD’s impact
3 on the prevention of ‘intra-EU posting of workers hidden social dumping’, its transposition into national law by 30.07.2020 and the first CJEU judgements on the grounds of the new Revised PWD 2018/957 have to be awaited; - also on the background that the CJEU’s most recent rulings in regard seem to ‘better’ protect posted workers (compared to CJEU judgements in the first decade of the new millennium, - cf. ‘Laval quartet’), especially as regards wage elements (cf. ammattilitto ry v ESA, C-396/13) and the explicit contrasting of the abuse of ‘letterbox’-companies in the intra-EU posting of workers context (Atlun, C-359/16 and Rosa Flussschiff, C-620/15).
The empirical Essay three analyses Transnational Company Agreements (TCAs) as a potential
alternative tool (situated outside the legal sphere of ‘hard law’) to contrast and prevent (hidden) social
dumping practices, first in regard to the only EU-EEA area and then in regard to the global level. The detailed ‘one-by-one’ qualitative content-analysis of the texts and provisions of the TCAs of two well-selected TCA-samples, ‘Sample 1’ and ‘Sample 2’ shows that within Europe (or within the EU-EEA area) TCAs have no Purpose (and hence also no Potential) to contrast and prevent ‘hidden social dumping’-practices (mainly due to TCAs’ ‘traditional’ weak enforceability and due to the fact that the ‘reference standards’ to which TCAs refer are ‘meaningless’ for the specific EU-EEA area), while on the global level, at least some TCAs can in certain, specific situations and circumstances, at least indirectly, help to contrast and prevent (hidden) social dumping.
Abstract [Italian]
Il ‘dumping sociale’ è un fenomeno economico, sociale e giuridico che si presenta essenzialmente in tre forme: "dumping salariale", "welfare dumping" e "dumping fiscale". Applicando un approccio (strettamente) interdisciplinare la presente tesi di dottorato analizza diverse forme di ‘dumping sociale’ e possibili strumenti per contrastarle.
Dopo aver definito il "dumping sociale" come una pratica e strategia sleale per eludere la normativa vigente in materia di lavoro e protezione sociale, all’interno dell’analisi del primo saggio viene definito e sviluppato il specifico concetto di "dumping sociale nascosto" (c.d. ‘hidden social dumping’), che si rivelerà utile altresì per gli altri due saggi della presente ricerca. Lo ‘hidden social dumping’ è una forma specifica di ‘dumping sociale’ che si manifesta solo su due dei quattro ‘livelli geografici’ su cui il dumping sociale si rivela, ossia il ‘livello nazionale’ e il ‘livello intermedio’. Al contrario, sia il ‘livello globale’ del dumping sociale (dove a prima vista il dumping sociale è più evidente), sia il ‘livello intra-societario’ del dumping sociale sono deliberatamente esclusi da tale concetto. Il modello teorico
4 “hidden social dumping lungo le catene del valore delle imprese” sviluppato all’interno dell’analisi della terza parte del primo saggio dimostra come la crescente tendenza da parte delle imprese di
esternalizzare processi operativi all’interno dello stesso paese e/o all'interno dello stesso quadro
sovranazionale omogeneo culturale e giuridico-normativo (come per es. l'UE – il ‘livello intermedio’ del dumping sociale) sia analizzabile e interpretabile, almeno in parte, da una prospettiva di ‘hidden social dumping’. Tale modello si basa sull’ipotesi (sostenuta anche in letteratura) che varie imprese
(core-enterprises) spostano i costi di produzione e di manodopera a fornitori, subfornitori e/o
(sub)appaltatori in modo sleale e spesso al limite della legalità.
Il secondo saggio si concentra sul solo ‘livello intermedio’ del fenomeno e concetto di ‘hidden social dumping’, analizzandolo attraverso una lente (strettamente) giuridica con lo scopo di esaminare se,
come e in che misura il quadro giuridico europeo relativo al distacco transnazionale intra-UE e in particolare l’evoluzione della direttiva 96/71/CE relativa al distacco dei lavoratori nell'ambito di una prestazione di servizi permette di (potenzialmente) ‘sfruttare’ e utilizzare il distacco transnazionale di lavoratori all’interno dell’UE per investire in pratiche e strategie di ‘hidden social dumping’. L’analisi all’interno del secondo saggio dimostra che né la Direttiva 2014/76/UE (la c.d. direttiva enforcement) concernente l'applicazione della direttiva quadro sul distacco 96/71/CE (e concernente modifiche limitate ‘solamente’ alla corretta applicazione della direttiva quadro sul distacco senza però modificarne le normeo intervenire su effettivi concetti sostanziali della tale) né la Direttiva 2018/957 recante modifica della direttiva 96/71/CE sono in grado di interamente risolvere le debolezze e le lacune della direttiva quadro 96/71/CE con riguardo allo ‘hidden social dumping’. La nuova direttiva 2018/957 introduce alcuni chiarimenti e modifiche sostanziali (come per esempio la chiara definizione di un periodo massimo di distacco e l’introduzione del concetto di ‘retribuzione’), ma alla fine rimane una "direttiva del mercato interno" la cui base giuridica rimane ancorata al solo principio della libera prestazione di servizi (articolo 56 TFUE), senza essere estesa anche all’articolo 153 TFUE (Titolo X ‘politica sociale’) con ampie conseguenze sulla linea interpretativa della CGUE in materia di distacco dei lavoratori. Questi ed altri limiti e difetti evidenziati e analizzati nei rispettivi capitoli limitano le potenzialità dell’attuale quadro normativo (europeo) sul distacco transnazionale di contrastare efficacemente lo ‘hidden social dumping’. Solo in seguito al recepimento della nuova direttiva da parte dei rispettivi ordinamenti nazionali (la cui data limite è prevista per il 30 luglio 2020) e le prime sentenze della CGUE in base alle disposizioni della nuova direttiva 2018/957 sarà possibile poter effettuare una valutazione più accurata dell'effettivo impatto della nuova direttiva 2018/957 nella prevenzione dello ‘hidden social dumping collegato al distacco transnazionale intra-UE dei lavoratori’. In generale, le sentenze più recenti della CGUE sembrano abbracciare una maggiore tutela dei lavoratori distaccati (rispetto alle sentenze della Corte pronunciate nel corso del primo decennio del nuovo millennio, ossia il c.d. "Quartetto Laval"), in particolare per quanto riguarda gli elementi salariali
5 (cfr. ammattilitto ry vs. ESA, C-396/13) e per quanto riguarda il contrasto esplicito all'abuso delle società fittizie (c.d. ‘letterbox companies’) per il distacco di lavoratori (cfr. Atlun, C-359/16 e Rosa
Flussschiff, C -620/15).
Il terzo saggio è un’analisi empirica relativa agli accordi aziendali transnazionali (Transnational Company Agreements - TCA) come un potenziale strumento alternativo (situato al di fuori della sfera giuridica dello ‘hard law’) per contrastare le pratiche di ‘(hidden) social dumping’, prima limitatamente al solo Spazio Economico Europeo (SEE) e poi a livello globale. L'analisi qualitativa dettagliata di ciascuno dei contenuti e delle disposizioni degli accordi transnazionali di due campioni di accordi aziendali transnazionali accuratamente selezionati (‘TCA Campione 1’ e ‘TCA Campione 2’) dimostra che all'interno dell'UE-SEE gli accordi aziendali transnazionali non hanno nessun scopo (e quindi anche nessun potenziale) di contrastare le pratiche di ‘hidden social dumping’ (principalmente a causa della loro tradizionale debole applicabilità e in ragione del fatto che gli ‘standard di riferimento’ richiamati da tali accordi sono ‘insignificanti’ per l’area UE-SEE). A livello globale, d’altro canto, l’analisi empirica del terzo saggio rivela che almeno alcuni TCA possono, in determinate situazioni e circostanze, almeno
CONTENT
General Introduction………p. 6
Essay 1: Hidden social dumping along enterprises’ supply and production chains
– a theoretical model………p. 15
Essay 2: Does the legal setting of intra-EU posting of workers leave space for
‘hidden social dumping’-practices?...p. 61
Essay 3: TCAs as tool to contrast and prevent (hidden) social dumping?...p. 225
Ph.D. thesis
“Hidden Social Dumping and Employment in Supply Chains: Phenomenology
and Safeguards”
General Introduction
The present Ph.D. thesis with the title “Hidden Social Dumping and Employment in Supply Chains: Phenomenology and Safeguards” is an interdisciplinary analysis divided into three Essays: “Hidden social dumping’ along enterprises’ supply and production chains – a theoretical model”, the analysis whether “the legal setting of intra-EU posting of workers leaves space for ‘hidden social dumping practices’” and the examination of “TCAs as a potential tool to contrast and prevent (hidden) social dumping”.
‘Social dumping’ in as economic and social phenomenon that arises in the context of globalisation of economic activities, the increased fragmentation of the production process, MNEs’ growing outsourcing and/or offshoring strategies, increased complexity of national and international production and supply chains etc. In line with Goyer at. al (2014:473ff.) it is argued that the globalization of economic activities can be associated to two important developments that have put (significant) pressure on distinct regulatory labour regimes and employment relations: the increased mobility of capital across borders (so-called ‘globalization of finance’) puts pressure on employment relations, and multinational corporations and states pursue policies which place downward pressure on labour standards and social protection schemes (cf. ‘regime and law shopping’ and ‘regime
building’, respectively). Hence, capital’s, workers’ and enterprises’ increased cross-border mobility and
the growing transnational fragmentation of firm’s activities and production processes arising in the course of intensified globalisation processes, puts different national ‘social- and labour-regulation’-systems into competition and opens up spaces for various different forms of so-called ‘social dumping’ practices and strategies. On the background of the extensive literature review, following operational definition for social dumping has been formulated:
“social dumping is an economic and social phenomenon that arises on different geographical levels either enhanced by (self-interested) enterprises’ management strategies that try to save production- and labour-costs1 in ordertogain competitive advantage, or, by sates’ governments that try to build
1 Or rather ‘social and labour costs’
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production- and labour cost- advantageous regimes seeking to attract inward investments (e.g. FDI). These two ‘actor-distinct’ forms of social dumping (often) work in conjunction with each other and are played on the cost-saving mechanism of evading and/or undermining labour (legal) standards, working conditions, wages (so-called ‘wage dumping’), social regulations and social security and social protection schemes (so-called ‘welfare dumping’) and other labour market regulations and ‘tax regime settings’ (cf. so-called ‘fiscal dumping’2). This enhances a downward competition (so-called ‘race to the
bottom’) that negatively affects workers’ protections and workers’ rights, working conditions and working standards and social welfare as a whole.”
The operational definition of social dumping and the literature review highlight two fundamental features of ‘social dumping’ that play a central role for the further definition ofthe specific concept ‘hidden social dumping’ (cf. in Part 2 of Essay 1):
1. there are essentially two different actors that engage in social dumping practices: either the single (self-interested) enterprise’s/MNE’s management seeking to save labour- and production- costs in order to gain competitive advantage (= so-called ‘regime or law shopping’)
or the state’s government that engages in ‘advantageous’ ‘regime building’-efforts (or
‘market-making’-efforts) seeking to attract inward investments (FDI) and capital (cf. Goyer et al. 2014:474; Berntsen and Lillie 2015:46-47);
2. Social dumping practices can arise on 4 different ‘geographical levels’: on the ‘global-level’, the ‘intermediate level’ (both cross-border forms of ‘social dumping’), the ‘national/domestic-level’ or on the ‘intra-corporate ‘national/domestic-level’ (cf. Table 1.1 in Part 1 of Essay 1);
In practice, it is very difficult to explicitly and clearly distinguish, who of the two different actors is actually engaging in social dumping practices, because companies’ ‘regime shopping’-practices and state governments’ ‘regime building’-efforts are in an interconnected, circular relationship as enterprises’ ‘regime shopping’-practices induce state governments to invest and engage in ‘regime
building’-efforts and vice-versa. Hence, the present Ph.D. thesis does not pretend to analyse and
classify ‘social dumping’ practices according to the actual actor that engages in social dumping practices, but rather specifies social dumping practices according to the ‘geographical level’ on which they arise. The specific concept ‘hidden social dumping’ describes, in fact, social dumping practices that
explicitly arise on the ‘intermediate level’ (defined by a “homogeneous cultural, economic and
legal-normative framework that comprises more than one country” like e.g. the EU) or on the ‘national-domestic level’ of social dumping and contemporaneously includes both the ‘enterprise actor engaging in social dumping’ and the ‘states’ government actor engaging in social dumping’. Thus, beyond
2 The present analysis builds on the three forms of social dumping, ‘wage dumping’, ‘welfare dumping’ and ‘fiscal
9 excluding the ‘intra-corporate level of social dumping (= different production sites of the same corporation that act as social dumpers ‘against’ each other3), the concept ‘hidden social dumping’
deliberately also excludes the ‘global level’ of social dumping even if, at least at first sight, it is the most obvious level on which social dumping occurs (‘unfair’ ‘social- and labour-cost saving’-strategies that build on the difference between national social and labour regulatory regimes are, at the first sight, most obvious to arise at the global level between different countries with significantly differing labour standards, workers’ protections and rights and social regulation systems). That is also the reason for applying the term ‘hidden’ for denominating the specific concept ‘hidden social dumping’: it defines forms of social dumping that are, at least at first sight, less obvious and thus, in fact, (more) ‘hidden’.
The specific concept ‘hidden social dumping’ is then used throughout the whole Ph.D. thesis, though in different ‘specifications’. Given that the here studied phenomenon ‘social dumping’ (and ‘hidden social dumping’) is an interdisciplinary economic, social and legal phenomenon, the present doctoral thesis applies a strictly interdisciplinary research approach:
The first Essay describes the phenomenon ‘hidden social dumping’ from an economic-legal ‘supply and production chain’-perspective. Essay 2 applies a strictly legal perspective in order to analyse the legal setting of intra-EU posting of workers as co-cause of ‘hidden social dumping’ as well as potential tool to contrast and prevent ‘hidden social dumping’. Essay 3 analyses Transnational Company Agreements (TCAs) as an alternative potential tool and instrument to contrast and prevent ‘(hidden) social dumping practices’, - first in regard to the only EU-level and then in regard to the global level.
More in detail, the first Essay is a theoretical analysis that on the grounds of an extensive literature review first circumscribes the phenomenon and concept ‘social dumping’ in general, then defines the specific concept ‘hidden social dumping’ (applied throughout the whole doctoral thesis) and then provides a theoretical model for analysing the specific form of hidden social dumping that specifically arises along enterprises’ supply and production chains. As already mentioned, the term ‘hidden’ restricts the ‘social dumping’-analysis to only two geographical levels of social dumping: the ‘national level’ and the ‘intermediate level’ of social dumping (which in the present Ph.D. thesis is represented by the EU level).
The second Essay is a legal analysis of ‘hidden social dumping’-practices arising at the EU level, namely the analysis of hidden social dumping practices that potentially arise from the imperfect legal setting of the EU internal market and in particular from the imperfect legal setting of intra-EU posting of workers.
10 The third Essay is an empirical analysis of one potential tool that can potentially be used to contrast and prevent ‘(hidden) social dumping’-practices: Transnational Company Agreements (TCAs) are examined whether they have the actual Purpose and the actual Potential to (effectively) prevent social dumping, - first in regard to the only EU-EEA area (hence, TCAs’ specific ‘hidden social dumping prevention’-relevance) and then in regard to the global level in general.
In practice, the in Part 3 of Essay 1 constructed theoretical model ‘hidden social dumping along supply and production chains’ is based on both geographical levels of hidden social dumping (namely the ‘intermediate level’ and the ‘national-domestic level’ of hidden social dumping), but is restricted to the only hidden social dumping practices that arise along enterprises’ supply and production chains, hence, ‘hidden social dumping practices’ that are potentially deriving from enterprises’ growing tendency to rely on suppliers and subcontractors (and enterprises’ growing outsourcing practice and strategies). The underlying hypothesis of that section is that within the same country (cf. ‘national-domestic level’ of hidden social dumping) or within the same homogeneous cultural and normative-legal framework (cf. ‘intermediate level’ of hidden social dumping like the EU for instance), core enterprises ‘unfairly’ shift production- and labour-costs to the lower ends of the supply chain and that outsourcing strategies and practices can thus be read and interpreted form a ‘hidden social dumping’-perspective. In this specific ‘supply chain hidden social dumping’-setting, suppliers and subcontractors (and not necessarily states’ governments) invest in advantageous ‘regime building’ (often on the ‘edges of legality’) that allow to save production and labour cost in order to attract core enterprises to contract them and so enhance a harmful ‘race to the bottom’ in regard to working conditions and working standards and hence, cause onespecific form of ‘hidden social dumping’.
The in Part 3 of Essay 1 constructed theoretical model illustrates various hypothesised reasons backed up by past literature, how and why suppliers and subcontractors are presumably able to ‘unfairly’ and ‘harmfully’ save production- and labour-costs compared to the respective ‘core company’: suppliers and (sub)contractors are presumed to have a higher propensity to rely on labour-cost-saving work- and employment-contracts, on no collective agreements or ‘cheaper’ types of collective agreements (e.g. so-called ‘pirate collective agreements’ or ‘contratti pirata’), on advantageous labour-cost and tax saving corporate forms (like –often fraudulent– service cooperatives in Italy, - cf. ‘fiscal dumping’), on higher shares of agency workers, on higher shares of posted workers etc. The reasons why suppliers and subcontractors are presumed to have a ‘greater ability’ than the respective ‘core enterprises’ to invest in such ‘hidden social dumping-regime building’-practices (that are often on the ‘edges of legality’) include suppliers’ and (sub-)contractors’ general smaller firm size, their lower ‘visibility’, their dependent and subordinated power position vis-à-vis the core enterprise, their general smaller unionization rate, weaker collective bargaining coverage and structures and thus their weaker
11
accountability (cf. specific section 3.2 of Essay 1). These hypothesized reasons and mechanisms should
have been empirically verified with primary data collected by the author by the means ofqualitative, in-depth case studies, but due to time and space constraints at this stage the empirical small-N case study research could not be conducted (yet) and thus the developed model remains a theoretical model based on hypothesis backed up by past literature.
ESSAY 2 addresses the only intermediate level of hidden social dumping but is not restricted to only
‘hidden social dumping’-practices that specifically arise along enterprises’ supply and production chains. In practice, Essay 2 examines whether, how and to what extent the legal setting of intra-EU posting of workers and in particular the recent developments of the ‘Posting of Workers Directive’ (PWD) leave space for and allow for ‘hidden social dumping practices’. As section 1.5 of Essay 1 illustrates, the European Union represents, in fact, an appropriate (supranational) ‘homogenous cultural and normative-legal framework’ for studying the specific intermediate level of social dumping. Even if in quantitative terms the ‘intra-EU posting of workers’-phenomenon is rather small (in 2017 ca. 0,5% of the employed workers in the EU - little more than 1 million4 - were subject to cross-border-posting), it is a relevant topic to study because the number of intra-EU postings is gradually and significantly raising (cf. respective section 1.3 ‘Quantifying the intra-EU posting of workers phenomenon’) and ‘intra-EU posting of workers’ is not any more a ‘niche’-issue, that only impacts workers that are directly involved in posting situations (cf. Venturi, 2018:2 in Adaptland), but increasingly also affects host and sending MSs’ labour markets and their workforce as a whole (cf. Wispelaere and Pacolet, 2018:35-37).
It has been shown that the current architecture of the EU-internal market leaves some space for ‘hidden social dumping’ practices, - in particular the specific legal setting of ‘intra-EU posting of workers’. Cross-border labour mobility and intra-EU labour migration are an essential part of the EU-internal market. While EU nationals that seek a job within the EUhave free access to the labour market of another EU-MS (Blanpain, 2008:270), use their right enshrined in Art. 45 TFEU (‘Free movement of Workers’) and enjoy the ‘principle of equal treatment’, the ‘intra-EU posting of workers’ is a peculiar
form of EU cross border labour mobility that is not regulated under the ‘free movement of workers’
-rules (Art. 45 TFEU) that guarantee the ‘equal treatment principle’, but is instead regulated under the ‘Freedom to provide services’ -rules (Art. 56 TFEU): employers based in the EU can temporarily post5
their employees to another Member State relying on Article 56 TFEU (‘Free movement of services’). During the temporary posting period, the posted workers remain subject to the home country’s (the
4 In regard to the specific posting activity from low-wage countries to a high-wage country according to PDs A1
data ‘only’ ca. 300.000 posted workers are counted.
5 The (posted) worker is sent to work on the sending employer’s behalf, - hence, the worker does not move of its
12 sending state’s) social security system (cf. ‘basic Regulation’ 883/2004 and amendments) and in regard to posted workers’ labour law entitlements (employment conditions, workers’ and social rights), according to the current PWD-setting, posted workers are entitled to only a nucleus of mandatory rules of the host state (cf. posted workers’ exception from the lex loci laboris). Moreover, this nucleus of mandatory rules has to be ‘proportional’ (proportionally justified) and must not represent any obstacle to the freedom to provide services (cf. EU case law and CJEU rulings in the ‘Laval quartet).
On the background that EU-MSs have significant different wages levels6 (cf. potential ‘hidden
wage-dumping’), social security systems7 (cf. potential ‘hidden welfare dumping’) and tax regimes (cf.
potential ‘hidden fiscal dumping’), this legal setting of intra-EU posting of workers in its present form potentially allows to circumvent host state’s social- and labour-regulation and can thus be used to invest in so-called ‘hidden social dumping’8: one can imagine the case in which a service provider
established in a EU-MS with comparatively low wage-levels, low labour standards and a ‘limited’ social security scheme posts the worker to a MS with (comparatively) high wage-levels, high labour standards and an extensive social security system (cf. section 1.4 on the link between ‘‘intra-EU posting of workers’ and hidden social dumping’) potentially gaining substantial labour-cost advantage vis-à-vis local enterprises established in the MS where the worker is posted to. To what extent intra-EU posting of workers can be (potentially) used for ‘hidden social dumping’-practices and to what extent host MSs can ‘protect’ their national social and labour regulation ‘regimes’ depends on the actual intra-EU posting of workers rules, - the Posting of Workers Directive that tries to guarantee both ‘fair’ competition and ‘fair’ treatment of posted workers9 (the ‘framework Directive’ PWD 96/71/EC recently
amended by the ‘Enforcement directive’ PWD 2014/67/EU and the Revised PWD 2018/957) and its practical implementation and enforcement in the distinct national (legal and economic) settings which is extensively analysed throughout Essay 2.
In fact, the legal setting of intra-EU posting of workers consist in particular of 3 fundamental pillars (and their interplay) that will be extensively examined in the respective Chapters of Essay 2:
1. the Posting of Workers Directive (and its content and provisions) that has been subject to recent normative redefinitions (Revised PWD 2018/957 adopted as one specific EPSR-initiative; PWED 2014/67/EU), - cf. Chapter 2 of Essay 2;
6 Eurofound empirical data from 2019 show that the hourly minimum wage ranges from 1,62€ in Bulgaria to
11,97€ in Luxembourg; cf. Freedland and Prassl (2016:3-10) and Barslund and Busse (2016) who also underline highly different industrial relations systems and traditions social policies.
7 With highly different rates of social contributions (cf. Borelli, 2017).
8 The possibility to exploit the ‘intra-EU posting of workers’-framework for gaining ‘unfair’ labour-cost advantages
(hence, for investing in ‘hidden social dumping’ as defined in Essay 1) originates in posted workers’ exception from the lex loci laboris.
9 Cf. Recital (1) of the Revised PWD 2018/957: “…aim to guarantee a level playing field for businesses and respect
13 2. the PWD’s interplay and interconnection withother EU legal acts like the ‘EU social security
coordination rules’, the Temporary Agency Work Directive and the rules on employment contract law;
3. and the EU case law, namely the European Court of Justice that actually interprets the intra-EU posting of workers rules in its judgements (cf. Chapter 3 of Essay 2);
Essay 2 shows that the legal setting of intra-EU posting of workers allows for ‘hidden social dumping’ practices and that hidden social dumping can arise from ‘legal intra-EU posting of workers’ (- the main issue of the present analysis-), but also from ‘illegal intra-EU posting of workers practices’ like the “abuse of PDs A1 documents”, the “abusive illegal posting by means of ‘letterbox companies’ and artificial corporate companies”, “posting as not temporary movement of workforce”, by “turning temporary migration or seasonal migration into posting”, by “non-application of the PWD-determined nucleus of mandatory rules of the host state in regard to ‘hard core’ terms and conditions of employment”, by “abusive posting through (fraudulent, non-genuine) temporary agencies” (cf. section 1.4.2 of Essay 2). The fact that already ‘legal intra-EU posting of workers’ allows to invest in hidden social dumping practise ‘facilitates’ also the (ab)use of ‘illegal intra-EU posting (of workers)’ for investing in hidden social dumping practices and the two aspects often blur.
Regulating the cross-border posting of workers within the EU (hereinafter intra-EU posting of workers) in a way that ensures fair mobility and competition (in order to prevent hidden social dumping) and simultaneously also guarantees the respect of the fundamental freedom of establishment (Art. 49 TFEU) and the freedom to provide services (Art. 56 TFEU), has shown to represent a major challenge involving significant trade-offs and allowing for ‘hidden social dumping’.
Essay 2 reveals that the EU’s and the Member States’ legal settings as well as the EU’s and the EU-MSs’ legal instruments and tools to contrast and prevent hidden social dumping, - for instance the EU Posting of Workers Directives -, don’t work perfectly15 and still allow for and leave (some) space for
hidden social dumping practices within the EU. On the background that ‘modern regulatory theories’ build on alternative governance-mechanisms that are increasingly state-law-centralized and non-state-led (Krause, 2018:328ff.), the third and conclusive ESSAY 3 examines whether there exist any instruments and tools (and practices) outside the legal sphere of hard law which can contrast and prevent (hidden) social dumping. Transnational Company Agreements (TCAs)16 are such de-centred,
15 Not perfectly formulated, nor perfectly implemented and/or enforced.
16 In literature TCAs are described as a rather new form of voluntary, autonomous, transnational collective
bargaining at company level (cf. Drouin 2015:218, Marassi, 2018:3, Ales et al. 2006:33) that so represent a rather new form of transnational governance (cf. Schömann 2012; Telljohann, 2009; Hadwiger, 2014:5; Krause, 2018:330; Leonardi, 2012; Ales, 2013, 2018) and of private transnational labour regulation (cf. Marassi, 2018:1).
14 private, self-regulatory (voluntary) instruments situated outside the legal sphere of hard law (cf. Lo Faro, 2012:153), that have, in fact, specific characteristics and features that make them, at least
potentially, relevant for contrasting and preventing (transnational) social dumping practices: As the
denomination Transnational Company Agreements already indicates, they are (intrinsically) transnational (like the social dumping phenomenon as treated in Essay 2 and in Essay 3) because the signatory parties on the employers’ side are multinational enterprises that operate transnationally (and the signatory parties on the employees’ side are the respective global and/or European Union Federations and/or EWCs) and the scope and application of TCAs extends to all MNEs’ operative locations, - in some cases and increasingly also to business partners, suppliers and subcontractors along global supply and production chains. Furthermore, at least some TCAs clearly address and ‘regulate’ ‘(hidden) social dumping relevant’-topics like ‘Wages and benefits’, ‘H&S/working environment’ as well as ‘Transfer, subcontracting and outsourcing’ (cf. empirical Part 2 Essay 3; - recall that the ‘kind of issues’ that are actually ‘(hidden) social dumping’-relevant is extensively illustrated in Essay 1 of the present doctoral thesis).
The main objective of the analysis of Essay 3 is, thus, to examine whether, how and to what extent TCAs can be used as a tool and instrument to contrast and prevent transnational (hidden) social dumping practices. In order to do so, after a short theoretical analysis of the general characteristics of TCAs (the actual signatory parties, TCAs’ implementation and ‘enforceability’ etc.) in the introductory Part 1 of Essay 3, the extensive empirical Part 2 (of Essay 3) first examines whether TCAs have the actual ‘Purpose’ to contrast and prevent transnational (hidden) social dumping practices and then, whether TCAs also have the actual ‘Potential’ (or ‘the force’) to (effectively) contrast and prevent ‘(hidden) social dumping’, first in regard to the only EU-EEA area (hence, TCAs’ specific ‘hidden social dumping prevention’-relevance) and then in regard to the global level in general.
Past literature shows that TCAs can be signed for various different Purposes (e.g. TCAs as ‘cosmetic tools’17, as ‘HR supportive tools’18, as ‘tools for enhancing cooperative social dialogue’19, as ‘expression
of CSR’20, as an ‘element of international cooperation of trade unions’21, as example of ‘bottom-up
industrial relations’22) and that for the assessment of TCAs’ ‘(hidden) social dumping prevention’-Potential, TCAs’ traditional weak enforceability and weak (legal) effectiveness has to be taken into
account as well as the fact that TCAs-provisions’ reference standards are often ‘meaningless’ of ‘too
17 cf. Egels-Zandén, 2009:531. 18 Cf. Hadwiger’s, 2014:14-28.
19 Cf. Krause, 2018:328; Egels-Zandén, 2009:540; Hadwiger, 2014. 20 cf. Krause, 2018:325; Fichter et al. 2011:76.
21 Cf. Lauria, 2016:2; Krause, 2018:331. 22 cf. Lo Faro, 2012:154.
15 loose’ (- at least with regard to certain geographical areas like the EU-EEA area as it is shown in the respective section 2.1.3).
In practice, the first section of the empirical Part 2 of Essay 3, analyses TCAs’ ‘(hidden) social dumping prevention’-Purpose and -Potential by accurately examining the actual content, ‘reference standards’ and so-called ‘enforcement tools’ (implementation- and monitoring-processes, dispute resolution procedures and potential sanction systems as well as TCA dissemination processes) of TCAs’ texts and provisions23 on the basis of two distinct well-selected TCA samples, ‘Sample 1’ and ‘Sample 2’ (the
specific sample selection-process is extensively outlined in section 2.1.2 of Essay 3).
The second section of the empirical Part 2 (section 2.2) uses the only ‘Sample 2’ and analyses TCAs’ possible ‘social dumping prevention’-Potential more in detail by examining the so-called TCAs’ potential ‘efficiency factors’ that potentially facilitate, promote and/or enhance TCAs’ implementation and enforcement. These analysed TCA potential efficiency factors are the “TCA-provisions’ actual content factor” (strictly linked to the analysis conducted in section 2.1), the “MNE-HQ’s country of origin factor” and the thereby linked ‘nature of the respective industrial relations setting’ (and – to a certain extent - ‘MNE’s corporate culture’), the “type and nature of the actual signatory parties”, the “TCAs’ dissemination and information process” and the “TCAs’ enforcement tools” (implementation- and monitoring-processes, dispute resolution procedures and potential sanction systems).
The empirical analysis will show that within Europe (or the EU-EEA area) TCAs have no Purpose (and hence also no Potential) to contrast and prevent ‘hidden social dumping’-practices (mainly due to TCAs’ weak enforceability and due to the fact that the ‘reference standards’ to which TCAs refer are ‘meaningless’ and ‘too loose’ for the EU-EEA area) while on the global level, at least some TCAs have the actual Purpose and also somePotential to contrast and prevent ‘social dumping’-practices. TCAs’ Potential to contrast and prevent social dumping practices is though strictly conditioned to certain very
specific situations and circumstances (like to countries where TCAs’ ‘reference standards’ are
meaningful and in which state authorities are weak and/or not interested to protect workers’ rights
and labour standards) and is rather limited to indirectly support the prevention of (hidden) social dumping.
ESSAY 1: “Hidden social dumping’ along enterprises’ supply and
production chains – a theoretical model”
Content
List of Abbreviations ... 16
List of Tables and Figures ... 17
Introduction – Abstract ... 17
PART 1: The Phenomenon ‘Social Dumping’ in literature ... 17
1.1. Globalisation, MNEs, outsourcing, (transnational) production and supply chains, – a socioeconomic context that allows for social dumping practices ... 18
1.2. Delimiting the specific concept ‘social dumping’ from the generic concept ‘dumping’ ... 21
1.3. Definition of the concept social dumping in literature – literature review ... 22
1.4. Classification of social dumping ... 27
STATE GOVERNMENTS as social dumpers – ‘market-making’ or ‘regime building’ ... 32
FIRMS/MNEs as social dumpers – ‘regime and law shopping’ and so-called ‘hidden social dumping practices’... 34
1.5. The intermediate level of social dumping studied in basis of the European Union institutional framework - the EU as potential ‘third actor that engages in (hidden) social dumping’? ... 35
1.6. Assessment of the effect of social dumping in literature ... 38
PART 2: Development of the concept ‘hidden social dumping’ ... 40
2.1. The concept ‘hidden social dumping’ ... 41
PART 3: Construction of the theoretical model “hidden social dumping along enterprises’ supply and production chains”... 45
3.1. Empirical evidence from existing social dumping literature ... 46
3.2. The theoretical model of “hidden social dumping along enterprises’ supply and production chains” ... 47
BIBLIOGRAPHY ... 54
SITOGRAPHY ... 58
Official documents ... 59
Annex Table 1.1 extensive version ... 59
List of Abbreviations
17 MNC(s) Multinational Corporation(s)
MNE(s) Multinational Enterprise(s) MSs (EU-) Member States
List of Tables and Figures
Table 1.1 CATEGORIES of social dumping practices classified by the two fundamental aspects ‘actors
engaging in social dumping ’and ‘geographical level of social dumping’
Table 1.1 extensive version CATEGORIES of social dumping practices classified by the two fundamental
aspects ‘actors engaging in social dumping ’and ‘geographical level of social dumping’ (in the Annex)
Introduction – Abstract
The first two Parts of this Essay 1 of the present Ph.D. thesis introduce, circumscribe and define the central concept ‘hidden social dumping’ that will then be used and analysed in Essay 2 (from a legal perspective) and in Essay 3 (examination of a potential instrument that can help to contrast and prevent the economic and social phenomenon ‘hidden social dumping’).
Part three of the present Essay 1 analyses the concept ‘hidden social dumping’ from an economic ‘supply and production chain’-perspective by constructing a hypothesised theoretical model of ‘hidden social dumping along the supply and production chain’. This theoretical model was intended to be used in practice in order to verify its ‘validity’ and its underlying hypotheses with empirical data, but due to time and space constraints the planned qualitative, small-N case study research in Italian and German MNEs and their suppliers and subcontractors could (unfortunately) not (yet) be conducted.
PART 1: The Phenomenon ‘Social Dumping’ in literature
In order to develop the specific concept ‘hidden social dumping’ that is then also applied in Essay 2 and Essay 3 of the present Ph.D. thesis, and in order to construct the theoretical model ‘hidden social dumping along European supply and production chains’ in Part r of the present Essay 1, it is useful to first circumscribe and define the generic economic and social phenomenon ‘social dumping’ that in literature has been addressed and discussed in various different ways and in various different contexts.
18
1.1. Globalisation, MNEs, outsourcing, (transnational) production and supply chains, – a
socioeconomic context that allows for social dumping practices
Enterprises’ economic activities are no longer territorially limited25, labour markets have become
globalized and transnational and multinational enterprises (MNEs)26 have become global players27 (cf.
Marassi, 2018:1). With the internationalization and the progress made by ICTs, capital markets and companies determine an unprecedented gap between places and processes, between the ‘space of policy’ and the ‘space of economics’: The ‘space of flows’ replaces the one of the places28 and the
growing outsourcing processes29 characterized by replacing ‘the make’ with ‘the buy’30 does not only
regard private enterprises but also the public administrations and their numerous, multiple service-provision-tasks31. International workers’ and enterprises’ mobility, the end of the vertically integrated
company (model)32 and the fact that firms’ activities are increasingly articulated in a network of
contracts33 that allow to acquire products and services from ‘outside’ the firm that previously were
realized ’internally’, opens up spaces for so-called ‘social dumping’ practices, the central topic analysed throughout all 3 Essays of the present doctoral thesis.
According to Marassi (2018:1), companies’ operations are increasingly conducted by (foreign) subsidiaries and they are outsourced34 to business partners (worldwide) and the main driving factors
25 The metamorphosis of the productive process and the global division of the production processes has led to
an international articulation of value chains (cf. Izzi, 2018:2).
26 Globalization makes economies increasingly interdependent through a centrifugal socioeconomic process, the
engine of which is represented by individual economic actors: the multinational enterprises (MNEs).
27 Today, the economic and legal context is strongly globalized and increasingly internationalized and is
characterized by the undisputed protagonists: the multinationals and their (global) supply chains (cf. Panajotti, 2017).
28 Cf. Bano (2008:232-234 cited in Izzi, 2018:3) who uses the term „relativization of the territoriality of law“ (it.
“relativizzazione della territorialità del diritto”).
29 Guadagno (2016:1) identifies the “geographical scope of the externalization [outsourcing] of production
processes, both at national and cross-border level”, cf. also Ratti, L., 2018:1-5.
30 Buy and/or source goods and/or services from outside the firm. For a discourse on ‘the make’ vs. ‘the buy’
consult for instance Zentes et al. 2004, pp. 243-250; note that as Izzi (2018:2) rightly argues, the ‘the make vs.
the buy’-setting is rather approximate as it relegates the central dynamics of relational cooperation between
companies to a secondary level (Barbera, 2010:208; Romei, 2016:510).
31 According to Izzi (2018:3-4), public procurement (where the commissioning party is a public administration)
represent an important and increasing segment of the national and European economy due to organisational efficiency reasons but merely also due to budgetary needs and cost containment logics, - according to Cernat and Kutlina-Dimitrova (2015) they amount up to approximately 14% of the EU-GDP).
32 cf. Izzi, 2018:1
33 While outsourcing strategies can be realized through a large range of different contractual typologies,
according to Izzi (2018:3) and Tamajo (2007:12) the prevalent one (in Italy, and around the world), is and remains the practice of ‘contracting’ and ‘subcontracting’ (in Italy for instance regulated by art. 1655 c.c. and art.29, comma 1 d.lgs. n. 276/2003).
34 ‘Outsourcing’ refers to obtaining certain services or products from a third party company
(http://www.businessdictionary.com/article/1090/offshoring-vs-outsourcing-d1412/); In other words, outsourcing is the moving of internal operations to a third-party (company) which can come in the form of selling physical plant to a supplier, to buy back goods or services, or shifting an entire business division to a third-party
19 that lead MNEs to undertake these business choices are “lower working conditions and production costs in the foreign countries”. Outsourcing and off-shoring business strategies are gaining importance35 and if they are mainly based on a labour- and production-cost savings rationale and logic
they can be identified and defined as ‘social protection- and labour regulation regime shopping’36
potentially inducing a so-called ‘race to the bottom’ in regard to social- and labour standards in different countries. ‘Regime shopping’, where enterprises seek to invest, in fact, in ‘cheaper’ labour-and social protection-regimes, represents only one of various, different forms of ‘social dumping practices’ (Sinn, 2008; Hauptmeier and Greer, 2012; Bernaciak, 2017; Ricci, 2019) that will be extensively and schematically discussed in this Part 1 of Essay 1. While the use of the term ‘social dumping’ in the public discourse often refers to global, cross-border competitive situations and settings, several social dumping practices can also be found inside domestic markets37 (cf. the
discourse on the ‘level of social dumping’ is intensely outlined in sections 1.3, 1.4 and 1.5 of this present Part 1 of Essay 1). As illustrated further on, the present analysis in Essay 1 (as well as Essay 2 and partially also Essay 3) will focus on so-called ‘hidden social dumping practices’ that arise inside a homogenous cultural and legal, normative framework (as the European Union for instance, - hence, cross-border social dumping that arises on an ‘intermediate level’ that is not the global level nor the national level, but ‘in between’) or inside the same country/nation state (cf. .
While the globalisation of the firm and the transnational fragmentation of the firms’ activity and production processes are seen as for many aspects an advantageous evolution-process of the enterprises (and for the enterprises)38, it entails a large range of legislative challenges in particular in
regard to the protection of labour, labour conditions and standards, because labour law and
and again buying the service back (https://www.forbes.com/sites/jwebb/2017/07/28/what-is-offshoring-what-is-outsourcing-are-they-different/#46fefb922a2e); note that unlike ‘Outsourcing’ (which can happen on domestic and/or cross-border level), ‘Offshoring’ is primarily a geographic activity of getting work done in a different country, usually to leverage cost advantages; the compound concept ‘Offshore outsourcing’ is then the practice of hiring a vendor to do the work offshore, usually to lower costs and take advantage of the vendor's expertise, economies of scale, and large and scalable labour pool.
35 Guadagno (2016:1) argues that even if the emergence of various outsourcing trends and strategies, (including
off-shoring outsourcing in internationalised and globalised fluid and fluctuating markets open to global competition), dates back several decades, “their pace and significance has increased in recent years on account of the economic setting becoming increasingly globalized” (“so much that the need to take into consideration these kinds of transformation options may be a necessary pre-condition for any company wishing to operate and effectively compete in the global market”).
36 Costamagna, F. (2017, 2019:80-81) defines ‘social dumping’ as unfair evading social- and labour-regulation.
According to Izzi 2018 and Perulli, 2007, also ‘law shopping’.
37 Cf. Eurofound (2016) Social Dumping.
38 Cf. the globalization of the firm leads to a worldwide unification of the market and a constant efficiency-gaining
interrelation and exchange with technology and innovation. As Tayauova, (2012) for instant notes, “nowadays, where competition among businesses intensifies rapidly, outsourcing is one of the instruments that gives the possibility to open access nearly every resource that is offered in market”. Cf. also some parts of Dunning’s (2001) ‘eclectic OLI paradigm’ (e.g. the so-defined ‘location advantages’ described as deriving from ‘market penetration access’ and ‘labour cost advantages’).
20 employment and labour relations39 are and remain traditionally rooted and managed on the local and
national level and there is until today no real framework, that (effectively) regulates international employment relations (cf. Panajotti, 2017:7)
Hence, globalization and firms’ growing outsourcing processes (both on national and cross-border level – cf. Guadagno, 2016) put different labour law and social security systems and tax regimes into competition and allow for different social dumping practices and strategies: ‘regime and law shopping’ practices with enterprises as ‘social dumpers’40 on the one hand and ‘regime building’ practices with
state governments as ‘social dumpers’ on the other hand. The different social dumping practices and strategies cannot only be diversified according to the ‘actor who is investing in social dumping’ but also according to the ‘geographical level on which social dumping practices arise’: the ‘global level’, the ‘national level’, the ‘intra-firm/intra-corporate level’ and, in fact, the here analysed ‘intermediate level’ which describes the various forms of ‘hidden social dumping’ practices arising in ‘homogenous cultural, legal and normative’ contexts like for instance the EU (for an extensive analysis of the different ‘actors engaging in social dumping’ and the distinct ‘geographical levels on which social dumping occurs’, consult sections 1.3 and 1.4 of the present essay).
According to Goyer at. al (2014:473ff.) globalization of economic activities can be associated to two important developments that have put pressure on distinct (regulatory) labour regimes41 and
employment relations: the increased mobility of capital across borders (so-called ‘globalization of
finance’) that puts pressure on employment relations42 and multinational corporations (cf. ‘regime and
law shopping’) and states pursuing policies which place downward pressure on labour (and social protection) standards (cf. ‘regime building’). Always according to Goyer et al. (2014:474) this “so-called ‘social dumping’ takes two forms that often work in conjunction with each other: 1.) firms/MNCs seek to de-invest in economies with high labour standards and relocate to cheaper production regimes43 2.)
39 Instead of using the more classical term and concept “industrial relations”, the present analysis uses the
‘newer’ and ‘(terminologically and conceptually) more comprehensive’ term “employment relations” (cf. Carrieri, 2016:8-9; Williams, 2017:XXV Preface). As Williams (2017:XXV Preface) suitable argues “other writers have noted (e.g. Blyton and Turnbull, 2004), the term ‘industrial relations’, although [by then] still widely used, is often associated with developments in traditional industries, like manufacturing, and with an emphasis on trade unions and joint regulations; ‘employment relations’, however, is more appropriate to understanding greater diversity in work and employment patterns”.
40 ‘social dumper’ refers to the ‘actor(s) that is actually engaging in social dumping’ (for an extensive analysis of
the different ‘actors engaging in social dumping’, consult sections 1.3 and 1.4 of the present essay).
41 At the level of the state national economies have established distinct labour regimes but international
competitive pressure threatens these distinct labour regimes.
42 For a more detailed debate on the globalization of finance in form of the actors’ ability to shift capital in an
unimpeded manner across borders consult Goyer et al. (2014) and cited contributions.
43 ‘Regime shopping’, or, according to Izzi (2018:2-3) and Perulli (2007 p. 58) ‘law shopping’ describes enterprises’
practice of selecting the most convenient social system benefitting from the competition between the rules in the different legal systems (inside the European Union and/or also outside the EU); in short, it means taking advantage of (the) ‘normative differentials’ (Izzi, 2018:2-3; cf. sections 1.3. and 1.4. of the present part 1 of essay 1 for a more detailed analysis). According to Goyer et al. (2014) MNCs have greater ability to ‘(social policy) regime shop’ by choosing to locate production where there are lower levels of constraining rules.
21 the state often plays its role of ‘competition state’ (Cerny 1995): with MNCs seeking to offshore production, states actively engage in regime building aimed at attracting inward investment and enhancing the comparative advantage of their system vis-a-vis other countries competing for FDI”. In short, capital’s, workers’ and enterprises’ increased cross-border mobility and the growing transnational fragmentation of firm’s activities and production processes arising in the course of intensified globalisation processes, puts different (national) ‘social- and labour-regulation’-systems into competition and opens up spaces for various different forms of so-called ‘social dumping’ practices and strategies, that will be carefully and attentively analysed in the next sections.
1.2. Delimiting the specific concept ‘social dumping’ from the generic concept ‘dumping’
First of all, it is useful to outline how the phenomenon ‘social dumping’ has been treated, conceptualized and analysed in literature.
In the existing literature the term and concept ‘social dumping’ is (and has been) used in various different ways that focus on very different (key) aspects of this economic and social phenomenon. In order to entirely understand the concept ‘social dumping’, it is useful to preliminary separate the term ‘social’ from the generic concept ‘dumping’.
The generic concept ‘dumping’ has been established mainly on two different levels: the microeconomic level of ‘dumping’ (cf. Krugmann, 1995) on the one hand, and the macroeconomic level of ‘dumping’ (Sinn, 2003, 2008; Bernaciak, 2015; Ricci, 2019) on the other. The here treated specific concept ‘social dumping’ is part of the macroeconomic interpretation of ‘dumping’ and has to be distinguished from ‘monetary dumping’44, the second form of macroeconomic dumping (Larsson,
1996, cited in Ricci 2019). Hence, within the compound term ‘social dumping’ the term ‘social’ specifies both the macroeconomic interpretation of the generic concept ‘dumping’ and, inside that macroeconomic interpretation, the specific focus on the explicit concept ‘social dumping’.
The microeconomic level of ‘dumping’ is well established in literature also since the concept ‘dumping’ initially originates in the microeconomic theory45 (cf. Ricci, 2019:161). The macroeconomic definition
44 According to Ricci, 2019, pp. 162ff. ‘monetary dumping’ derives from “systematic real undervaluation of the
domestic currency with respect to its long run equilibrium position, defined as the purchasing power parity (PPP) exchange rate. Monetary dumping is [thus] a consequence of direct and indirect government interventions on exchange markets (currency manipulation), or distortions in the international monetary and financial system (Auboin & Ruta, 2013 cited in Ricci 2019)”.
45 As Ricci (2019:161) illustrates, in the microeconomic theory the concept dumping indicates “the price
discrimination behaviour of monopolistic firms within segmented markets, in which the prices of two similar goods are in different ratios to marginal costs (Varian, 1989). This notion has been applied in the microeconomic international trade theory to describe the ability of oligopolistic firms to discriminate between foreign and domestic markets because of different demand elasticities, and used to explain intra-industry trade in identical products (Brander & Krugman, 1983; Krugman, 1995 cited in Ricci, 2019:161).”
22 of ‘dumping’ on the other hand is more problematic and controversial because, as Ricci (2019: 162) appropriately illustrates, “it refers to the structural characteristics of a national economy and it is strongly influenced by state policy issues” (cf. Maslauskaitè 2013 and Bernaciak 2015 cited in Ricci, 2019:162). This makes the macroeconomic interpretation of ‘dumping’ vague in its nature: ‘macroeconomic dumping’ can, in fact, assume various different forms46 not unequivocally
circumscribable and especially the specific concept ‘social dumping’ has been treated in literature in various different ways, from various different perspectives and in various different fields of study (e.g. economic theory, economic sociology, institutional political economy, employment relations... – section 1.3 will in fact provide a more detailed literature review on how the concept and term ‘social dumping’ has been used in literature). Furthermore, also the high political resonance of the term ‘social dumping’, at least in the European debate47, linked to the term’s and concept’s generic and often
imprecise use, contributes to its vagueness and widely differentiated use.
While the term’s and concept’s wide and generic nature and use can be seen as (a) weakness of the concept48 and hinder its (rigorous) scientific use49, the present study takes it instead as (an) opportunity
in order to be able to adapt the concept ‘social dumping’ to the first two Essay’s specific research purpose: an inter- and multidisciplinary analysis of the so-called ‘hidden social dumping practices’ arising inside the European single market or even within the same European country that will be circumscribed and studied by adapting the in part 2 of Essay 1 ad-hoc constructed homonymous concept ‘hidden social dumping’. Hence, as the title of the present Essay already indicates, the present dissertation exclusively treats the specific macroeconomic dumping-form ‘social dumping’, in Essay 1 and 2 further narrowed to the even more specific form of ‘hidden social dumping’.
In order to be able to appropriately adapt the concept ‘social dumping’ to the present analysis’ purpose, it is fundamental to first systematize the concept ‘social dumping’ by analysing and schematizing the different specific social dumping approaches50 discussed and pursued in past
literature in regard (cf. Bernaciak 2015:2). That is what the next two sections 1.3 and 1.4 will provide for.
1.3. Definition of the concept social dumping in literature – literature review
46 Cf. Ricci (2019:160) who observes the „controversial definition of macroeconomic dumping with various forms
that it can assume…”
47 cf. Bernaciak, (2015:1) observing social dumping’s high political resonance during the various EU-enlargement
processes for instance.
48 especially if not well-defined for the respective research-purpose. 49 In accurate/rigorous scientific research/contributions
23 The present study starts from and builds on two quite recent (and at the same time quite generic) definitions of the concept ‘social dumping’:
- according to Ricci (2019:162) “social dumping relates to lower labour legal standards with respect to
other countries competing in the same market” and “the unfair advantage consists in a downward competition on the workers’ conditions aimed at reducing labour costs”
- Bernaciak (2015:2)51 defines social dumping as “the practice undertaken by self-interested market participants, of undermining or evading existing social regulations with the aim of gaining competitive advantage” (Bernaciak 2015 p.2).
These two definitions already clearly identify two52 fundamental aspects of social dumping that define
the concept throughout the existing literature:
- In line with the existing social dumping literature (Sinn 2003, 2008; Bernaciak, 2015; Ricci, 2019…) the
final purpose of social dumping practices and strategies is ‘to gain competitiveness53’ (on different geographical levels and by means of different actors as it will be illustrated further on)
- for most existing social dumping literature approaches the predominant way for achieving the final objective of gaining competitiveness, is ‘to (‘unfairly’) reduce labour costs’, i.e. ‘to reduce operational and production costs by reducing and saving on labour costs’54, - in various different ways as it is
discussed in the next paragraph).
Hence, in line with most existing social dumping literature, the present analysis starts from the basic ASSUMTION that:
“the final aim and purpose of social dumping (practices and strategies) is to (‘unfairly’55) reduce and
save labour costs in order to gain competitiveness” in nowadays (mostly56) free and globalized markets”
51 Bernaciak (2015) builds this social dumping definition building on the contributions in the field of economic
theory, economic sociology and institutional economy collected in her edited mature book specifically and explicitly dedicated to the topic ‘Social Dumping in Europe’.
52 Personal note: Maybe use ‘two’ to be more specific and not always generic… (like ‘some’)
53 Gaining competitiveness also includes countries gaining competitiveness as ‘location to invest in’ (cf. Goyer et
al. 2014:474).
54 Of course, in general, there are various different ways of enterprises gaining competitiveness, but the specific
social dumping discourse relates to enterprises’ operational costs-reduction strategies and in specific to various different ‘labour cost reduction strategies’ (see the different social dumping definitions in literature outlined in the next paragraph). For instance, also the 2013 Ernst & Young study across the eight European countries (Denmark, Finland, Germany, Netherlands, Norway, Spain, Sweden, UK) identified that among the most important reasons for outsourcing business processes, ‘improvements in cost levels’ still represents the most frequently cited reason for outsourcing (with 42%; followed by ‘efficiency improvements’ with 33% and ‘a greater focus on core business’ with 26% - cf. Ernst & Young 2013:14-15).
55 Cf. ‘unfair competition’ logic - cf. Vaughan-Whitehead (2003) suggests to distinct between a ‘narrow definition
of social dumping’, limited to respecting or failing to respect the law (cf. also Berntsen and Lillie 2015), and a more general definition based on the notion of ‘unfair competition’.
56 Against a large part of the general (public) opinion, perception and expectations most markets are not
totally/perfectly free (cf. Weiss, 2010 who illustrates, that whilst the USA is held up as the quintessential LME-liberal market economy, in reality, in many areas the US state is highly interventionist, especially the R&D in high-tech and defence industries) and especially in recent days of (the wave of) new national (economic) protectionism
